The Mental Models Daily Podcast

Adverse Selection


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Adverse selection occurs when one party in a transaction has more information than the other party and uses that information to their advantage, resulting in an imbalance of information and adverse outcomes for the less informed party. It is commonly observed in insurance markets, financial transactions, and employment contracts.

Imbalanced info leads to bad choices. Transparency isn’t just nice—it’s necessary.

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The Mental Models Daily PodcastBy Mental Models Daily

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